why Microsoft did not consider the basic accounting standard

Hi All,

Why Navision Posting the values to Purchase Account, Direct cost applied account when user post the purchase Invoice ?
My client tells that as per the accounting standards there is no need to post the any values to above accounts as i explained .
Could any one throw some light why Microsoft did not consider the basic accounting standards.?

Thanks in advance.

Seriously?

I suggest you understand the postings made and then take the client through it step by step, depending upon whether expected costs are to be processed or not. The client is in charge of the posting accounts, so ultimately it appears where they state within the process. By the way the standard accounting practice would be to recognise liability for payment at the processing of the invoice - the receipt and PO are intentions, whilst you can accrue the legal document is the invoice and it is this that must hit the creditors control/purchases account.

Yes .

I am not talking about the End results .
Client complaints Nav Posting concept is against the accounting standars and says not required to post those ledgers (Purchase Account, Direct cost applied account) at the time of purchase invoice ?

It should post to Creditors account , Inventory account only.

Thanks in advance

The purchase account is the creditors account. Name GL account 5000 Creditors Account and apply it to the payables account - when do you believe the creditors account will get hit if this is not used? As for inventory as you have already hit this on the receipt in an expected cost environment then hitting it again would double the value of your inventory.

What you need is an accounts consultant to sit with them and talk the same language - it does exactly what they want and more.

Thanks Adam,

When you post the Purchase Invoice in Navision system will post the values to following accounts.

Creditors account - Credit

Purchase Account - Debit

Inventory Account - Debit

Direct Cost Applied account - Credit

What client says as per the accounting standards no need to post the values to Purchase Acc , DCA .

Thanks In Advance

There is because of the way the receipt processes.

Here is my advice - load a purchase order - receive it. Track ALL transactions from the purchase order. Then load the invoice, remove the direct cost credit and purchase account debit and see that you have balances in those accounts from the receipt - if it did not post you would be left with non-balanced transaction accounts, essentially a one sided entry. I do not have the software otherwise I would explain, but put it this way, do you think out of the hundreds of thousands of Navision implementations your customer is the first to spot this, is this not a little bit worrying for all of the users, and auditors of the users?

You are only looking at half the transaction - you must look at all of it to make sense.

I agree with Adam.

You (your customer) is better off if using standard NAV. We usually spend time with our customers and explain to them how NAV is supposed to work - and does work.
At first glance the NAV-way may seem kind of strange, but when you know the system and it’s possibilities. And then you most likely are going to like the NAV-way.

I do…

Dear Hansika,

It seems, first of all, your client does understand Accounting Standard. Which Accounting Standard the NAV posting is violating? Can you deliberate on this.

NAV is following a perfect ‘Integrated system’ of cost and financial accounting. Only you need to understand the logic.

Purchase A/c - Dr

Creditors A/c - Cr

it is the normal accounting entry which all of us understands. Apart from that, how do you raise the stock A/c in the books? Not, only that, a portion of the cost incurred to procure the stock and inventory carrying cost may be needed to be loaded into my inventory cost. How we do this?

Thus, NAV passes a 2nd entry:

*Stock A/c- Dr*

Direct Cost Applied A/c Cr

in simple words that portion of cost which we apply to raise the stock is what is ‘Direct Cost applied’.

I believe, no Accounting standard is violated.